The 21 day time limit for Statutory demands means that you must apply to set the demand aside or comply with the demand within 21 days.
The Courts have interpreted compliance with the 21 day time limit very strictly.
Failure to comply with the 21 day time limit for compliance for a statutory demand can have very serious consequences for the debtor company.
Failure to apply to set aside the statutory demand and serve the documents can mean that your application is void.
The High Court of Australia settled the varying legal opinions in David Grant & Co Pty Ltd v Westpac Banking Corporation [1995] HCA 43 (“David Grant“).
This article explains all you need to know about the 21 day time limit for a statutory demand and how the Courts have decided this issue since David Grant.
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21 day time limit for Compliance with Statutory Demands
If a company has been served with a statutory demand then the company has 21 days after the statutory demands are served to either:
- Pay the debt (or debts) on the demand; or
- Apply for the demand to be set aside; or
- Ask the issuer to withdraw the demand; or
- Secure or compound for that amount or total to the creditor’s reasonable satisfaction.
To “compound” for the debt means:
To “compound” for a debt is to accept an arrangement for payment of the amount of the debt or of a different amount – Commonwealth Bank of Australia v Parform Pty Ltd [1995] FCA 1445.
Section 459F of the Corporations Act says:
(2) The period for compliance with a statutory demand is:
(a) if the company applies in accordance with section 459G for an order setting aside the demand:
(i) if, on hearing the application under section 459G, or on an application by the company under this paragraph, the Court makes an order that extends the period for compliance with the demand–the period specified in the order, or in the last such order, as the case requires, as the period for such compliance; or
(ii) otherwise–the period beginning on the day when the demand is served and ending 7 days after the application under section 459G is finally determined or otherwise disposed of; or
(b) otherwise–21 days after the demand is served.
The Courts are unable to extend time for compliance with statutory demands, absent an order contained in the decision upon the hearing of an application to set aside a statutory demand pursuant to section 459G of the Corporations Act.
This was the decision of the High Court in Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Limited [2008] HCA 9 where the Court said:
Unless the contrary intention appears in the Act, the power to extend the period for compliance is to be understood as including power to extend it even if the period has ended. But there are several features of Pt 5.4 of the Act which lead to the conclusion that a contrary intention does appear.
Broadly, the Corporations Act allows for the Court to extend the period for compliance with a time requirement under the Corporations Act.
Section 9 of the Corporations Act says:
Unless the contrary intention appears … “extend” in relation to a period … includes further extend; and has a meaning affected by section 70.
Section 70 of the Corporations Act says:
Where this Act confers power to extend the period for doing an act, an application for the exercise of the power may be made, and the power may be exercised, even if the period, or the period as last extended, as the case requires, has ended.
However, what the High Court said in Aussie Vic Plant Hire was that Part 5.4 of the Corporations Act, being the part that deals with statutory demands (amongst other things), a contrary intention did in fact appear.
In the joint judgment of Gleeson CJ, Hayne, Crennan and Kiefel JJ the High Court said:
If the period for compliance with a statutory demand has expired, the Act does not permit the making of an order extending the period for compliance.
This decision has been followed in the Queensland Court of Appeal.
In Palmer Petroleum Pty Ltd v BGP Geoexplorer Pty Ltd [2016] QCA 149 the Queensland Court of Appeal said:
If the company applies in accordance with s 459G for an order setting aside the demand, there are then two possible periods for compliance. One possibility results from an order by the court for the extension of the period for compliance. The other possibility is where the period is not extended by the court, in which case, the period for compliance ends seven days after the application to set aside the demand is finally determined or otherwise disposed of.
McMurdo JA then went on to say (with Fraser JA, Philippides JA agreeing):
There is no power to extend the period for compliance once that period has expired. The High Court so held in Aussie Vic Plant Hire Proprietary Limited v Esanda Finance Corporation Limited [2008] HCA 9. Clearly then, the period for compliance expired … at which point, the demand was still in effect and the appellant had not complied with it, with the consequence that the appellant is taken to have failed to comply with the demand.
21 day time limit for Setting aside Statutory Demands
Section 459G of the Corporations Act says:
(1) A company may apply to the Court for an order setting aside a statutory demand served on the company.
(2) An application may only be made within 21 days after the demand is so served.
(3) An application is made in accordance with this section only if, within those 21 days:
(a) an affidavit supporting the application is filed with the Court; and
(b) a copy of the application, and a copy of the supporting affidavit, are served on the person who served the demand on the company.
Section 58AA of the Corporations Act defines Court to mean:
“Court” means any of the following courts:
(a) the Federal Court;
(b) the Supreme Court of a State or Territory …
If a company has been served with statutory demands with an affidavit in support (not a judgment in support), then the company has 21 days to:
- Apply to the Federal Court or the Supreme Court for an order setting the statutory demand aside; and
- Serve a sealed copy of the application and the supporting affidavit on the person who served the statutory demand.
Does the Court have Discretion?
In David Grant the High Court noted that the phrase “may only” was not used in a discretionary sense, but was used in a “facultative and permissive sense”. The Court said (at 28):
… the use in s 459G(2) of the term “may” does not give rise to the considerations which apply where legislation confers upon a decision-maker an authority of a discretionary kind and the issue is whether “may” is used in a facultative and permissive sense or an imperative sense (13). Here, the phrase “(a)n application may only be made within 21 days” should be read as a whole. The force of the term “may only” is to define the jurisdiction of the court by imposing a requirement as to time as an essential condition of the new right conferred by s 459G.
The Court decided that a Court will only have jurisdiction to hear an application pursuant to 459G if it is made and served within the 21 days time-frame.
The 21 day time limit to apply to set aside a statutory demand has been interpreted very strictly. If you have been served with a demand and need to set it aside, it is vital that you engage a suitably qualified professional
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21 Day Time Limit to Set Aside Statutory Demands
A good place to start when looking at the 21 day time limit to set aside a statutory demand is the High Court of Australia case of David Grant & Co Pty Ltd v Westpac Banking Corporation [1995] HCA 43 who said:
The court may make an order extending the period for compliance with the statutory demand. If the company applies “in accordance with section 459G” to set aside the demand, then an order extending the time for compliance may be made.
And then went on to say:
The requirement in s 459G that the application to the court for which it provides be made only within 21 days after service of the demand … These reasons lead also to the rejection of the reliance by the appellants upon s 70 … However, the Law does not confer a power to extend the period within which an application may be made under s 459G.
The reason for the strictness of the interpretation of the legislation is because of the intention of the legislature when drafting the Corporate Law Reform Act 1992 (CTH). David Grant said that:
The provisions of the new Pt 5.4 constitute a legislative scheme for quick resolution of the issue of solvency and the determination of whether the company should be wound up without the interposition of disputes about debts, unless they are raised promptly.
The Court in David Grant decided that one of the purposes of the amendments which evolved into what we use today was for the quick resolution of solvency issues, unless disputes are promptly raised.
The High Court in David Grant also specified the manner in which a 459G application is to be made. The Court said:
… an application is made in accordance with s 459G only if, within those 21 days, a supporting affidavit is filed and a copy thereof and of the applications are served
So, this essentially means that if a debtor company wants to apply to set a statutory demand aside, the application and supporting affidavit must be filed in the Court, and a sealed copy of both must be served on the creditor within 21 days after being served with the statutory demand.
Summary of the Above
If a company is served with a statutory demand, then the only power that the Court has to extend the time for compliance is pursuant to a validly filed and served application to set aside the statutory demand.
In all other cases, the Courts have held that a company must adhere strictly with the 21 day time time for compliance with statutory demands.
So, this means that from the day that a company is served with a statutory demand, the company must, within 21 days do one of the following:
- Pay the amount on the statutory demand or demands; or
- Compound for that amount to the creditor’s reasonable satisfaction; or
- Get in writing from the issuer, a notice that they withdraw the demand; or
- Apply to the Court for an order setting aside the statutory demand.
Care must be taken. For example, if a company has requested that the issuer withdraws the demand, and the issuer does nothing for two weeks, then the company will only have one (1) week to make the application to set the demand aside.
The application to set a statutory demand aside must be drafted, filed and a sealed copy served before the expiration of the 21 day time limit.
Does this Part Operate Harshly?
In Obiter in David Grant & Co Pty Ltd v Westpac Banking Corporation [1995] HCA 43, quoting Sheller JA in Re J and E Holdings Pty Ltd (1995) 17 ACSR 319, Gummow J said:
No doubt, in some circumstances, the new Pt 5.4 may appear to operate harshly … In particular … the drastic commercial consequences which may follow the issue of process for winding up and to the inability of a company, which for good reason had been late in filing or serving an application, to set aside the statutory demand.
The 21 day time limit to apply to set aside a statutory demand has been interpreted very strictly. If you have been served with a demand and need to set it aside, it is vital that you engage a suitably qualified professional
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Service of Statutory Demands over the Christmas Period
Arguably, a good example of this can be seen in J & K Homes Pty Ltd v Evans Lawyers [2017] QSC 24 where Evans Lawyers issued J & K Homes Pty Ltd with a statutory demand on 19 December 2016, meaning that the time for compliance, or the time to file and serve an application and affidavit to set aside the demand, was 9 January 2017. The defendant argued that they were disadvantaged because over the Christmas period the Courts were closed.
Citing David Grant & Co Pty Ltd the Supreme Court of Queensland said:
As the applicant did not file and serve its application within the 21 day period required, the Court has no power to make an order setting aside the statutory demand.
The serving, and subsequent compliance with statutory demands, over the Christmas period has been discussed in a number of different cases.
Service to an Office Closed over Christmas
In SV Steel Supplies Pty Ltd v. Palwizat [2007] QSC 24 service of the statutory demand was made by placing the documents under the door of the registered office of the debtor company on Friday 22 December 2006.
The office was closed for Christmas between 12 p.m. on 22 December 2006 until 8.30 a.m. on Monday 8 January 2007, being 17 days, in which notice was given by a sign on the door of the office.
The applicants made an application to set aside the statutory demand alleging that service was not affected on the registered office until the document was brought to the attention of the applicant.
After reviewing the authorities, following Fancourt v Mercantile Credits Ltd [1983] HCA 25 amongst others, the Court decided that delivery had been made to the registered office, and dismissed the application to set the demand aside. The Court said:
There can be no doubt that the notice has been served in accordance with s.109X of the Corporations Law. Nor can there be any doubt that the notice came to the company’s notice although some significant time after the service was effected in accordance with s.109X. Nor in my view is there anything in what the respondent did in giving the notice nor in her dealings with the applicant which could support a claim that service of the statutory notice in the way and at the time that it was effected constitutes an abuse of process.
In Bluechip Development Corporation (Cairns) Pty Ltd v PNP Realty Pty Ltd [2009] ACTSC 33 the application to set aside a statutory demand and supporting affidavit was rejected by the registry for non-compliance. By the time the registry sent a requisition setting out the respects in which they did not comply with the Rules, the 21 day time for compliance had passed.
The demand was served on 18 December 2008 but the application was not filed until 5 January 2009.
The respondents filed an application for an order that the applicants be wound up for failure to comply with the statutory demand.
The applicants lodged an application for an injunction restraining the respondents from relying on the statutory demand, on the ground of abuse of process.
The Court said:
I am satisfied on the facts that the statutory demand was validly served. It was suggested by counsel that PNP or its solicitors deliberately delayed serving the statutory demand until just before Christmas, so as to make it practically difficult or perhaps impossible for BDC to make an application to set it aside in time. I am not satisfied that there was any deliberate plan to that effect in the minds of those giving instructions on behalf of PNP, or its solicitors.
Master Harper then ruled that:
In those circumstances the application … by interlocutory process … in the winding-up proceedings will be dismissed with costs
In Career Training on Line Pty Ltd v B E S Training Solutions Pty Ltd; v Buckland [2010] NSWSC 460 the issuer of the statutory demand had personally served the demand on 23 December 2009 by sliding it under the door of the registered office (identified by the ASIC current extract).
The registered office was an accountant’s office. The accountant had left for the day and was not back at work until 29 December 2009, being the first business day after the Christmas break.
The question for the Court was whether the demand was served on 23 December or on 29 December. Barrett J held that:
service of each statutory demand occurred on 23 December 2009 … The filing of each originating process and supporting affidavit on 19 January 2010 (and subsequent service thereof) therefore occurred outside (and not “within”) the period of 21 days referred to in s 459G(2) and s 459G(3) … Consistently with David Grant & Co Pty Ltd v Westpac Banking Corporation Ltd, the originating process in each proceeding must be dismissed. It will also be ordered, in each case, that the plaintiff pay the defendant’s costs of the proceedings.
So even if nobody is in the office of the accountant, or the solicitor, at the address for service, if service has been performed correctly, and it is not deemed to be an abuse of process, then service is deemed to have occurred on the date of delivery, not the date of receipt of statutory demands.
Even if the office is closed over Christmas!
The 21 day time limit to apply to set aside a statutory demand has been interpreted very strictly. If you have been served with a demand and need to set it aside, it is vital that you engage a suitably qualified professional
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Weekends or Public Holidays
Section 36(2) of the Acts Interpretation Act 1901 (Cth) says:
If (a) an Act requires or allows a thing to be done; and (b) the last day for doing the thing is a Saturday, a Sunday or a holiday; then the thing may be done on the next day that is not a Saturday, a Sunday or a holiday.
In Kanwa Nominees Pty Ltd v ATO [2001] ACTSC 30 said:
It seems to me that it must follow that, for the purposes of determining whether this application was filed within time, the effect of s36 of the Acts Interpretation Act must be taken into account. The effect of s36 of that Act is that, although a count of 21 days from the date of service, being 19 February 2001, would indicate that the deadline for filing the application and affidavit was 12 March 2001, because that date was a public holiday in the Australian Capital Territory, the expiry of 21 days must be taken to the next working day, being 13 March 2001.
Setting Aside Statutory Demands
For an application setting aside statutory demands, the application and supporting affidavit must be filed in the Court, and then a sealed version is to be served.
In Cooloola Dairys Pty Ltd v National Foods Milk Ltd and Alait Pty Ltd v National Foods Milk Ltd [2004] QSC 308 the Supreme Court of Queensland said:
The authorities establish that the copy of the application served on the respondent must be such as to show that it is a replication of the application which has been filed in the court. To do that it must show the action number given it by the court and it must show the return date for the hearing of the application. It must, also, I think, show the seal of the court to indicate that there are curial proceedings on foot.
In Dominion Capital Pty Limited v Pico Holdings Inc [2001] VSC 458 the Court said:
In my opinion, the Court has no jurisdiction to hear the application when it and the supporting affidavit have not been effectively served “in accordance with” the requirements of s.459G(2) and (3)
In Complete Windscreen Service Nominees Pty Ltd v Nielsen and Moller Windscreens Pty Ltd (1995) 121 FLR 178 the Court decided that an application to set a statutory demand aside filed and served within 21 days, but the affidavits filed and served outside the 21 days, was not valid. They said:
If the steps contemplated by s 459g are not taken within the 21 day time period, it may be said that there is no application under Pt 5.4a, and accordingly no question of defect or irregularity falls for consideration.
The authorities show that an application to set aside statutory demands, and accompanying affidavit must be filed in the Court, sealed with the Courts seal, show the matter number given it by the Court, and include the return date for the hearing.
Then, this version is to be properly served on the issuer of the statutory demands – all within the 21 day time limit for it to be effective.
Failure to do so within 21 days, and the company will be presumed to be insolvent.
If the application to set aside is filed and served before the 21 day time limit, the clock stops running until the Court gives its judgment.
The 21 day time limit to apply to set aside a statutory demand has been interpreted very strictly. If you have been served with a demand and need to set it aside, it is vital that you engage a suitably qualified professional
EXPERIENCED & DEDICATED TEAM – PROVEN RESULTS
CONTACT US – TIME IS OF THE ESSENCE
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Abuse of Process and Failure to Comply with Statutory Demand
In some instances the Courts have allowed injunctive relief if the debtor company can successfully prove that the issuance of statutory demands was for an improper purpose, and is an abuse of process.
This still does not allow the company to file an application to set aside a demand after the 21 day period, but may allow the company to avoid the consequences of the statutory demand.
However, the authorities say that this is very difficult to do.
In House of Tan Pty Ltd v Beachiris Pty Ltd (1996) 14 ACLC 1536 Brownie J said:
(i) A court has power to dismiss or stay winding up proceedings as an abuse of process in appropriate cases … (ii) The effect of the enactment of CL Pt 5.4 is to limit the exercise of that power in cases to which CL Pt 5.4 applies … (iii) In a small number of cases, the power will still exist – although the factual matrix would need to make it clear that CL s 459S has no operation.
This article does not focus on winding up applications, however examples of cases where a winding-up application based upon non-compliance with statutory demands have been held to be an abuse of process include:
- Victorian Workcover Authority v Barroaghan Pty Ltd [2001] VSC 413;
- Pacific Communication Rentals Pty Ltd v Walker (1993) 12 ACSR 287; and
- Roberts v Wayne Roberts Concrete Constructions Pty Ltd [2004] NSWSC 734.
Failure to Comply with a Statutory Demand or Set it Aside
As you can see above, the Courts have interpreted the time limit for compliance with statutory demands, or the time to file and serve an application to set a statutory demand aside, very strictly.
If you have been served with statutory demands, it is vital that you seek legal advice and assistance as soon as possible, as time is very much of the essence.
Withdraw the Statutory Demand
A company served with a statutory demand in Queensland can write to the issuer of statutory demands and request that they withdraw the statutory demand.
The issue as to whether a statutory demands can be withdrawn was settled in Australia in the case of Cempro Pty Ltd v Dennis M Brown Pty Ltd (1994) ACSR 628 and then affirmed In the matter of Chameleon Mining NL; Chameleon Mining NL v Atanaskovic Hartnell [2009] NSWSC 602.
Read our article on how to withdraw a statutory demand for more.
However, whatever a company chooses to do with the statutory demands, it must adhere to the strict 21 day time limit given in the Corporations Act.
If the issuer of statutory demands do not respond to the request for withdrawal, then the statutory demands remain on-foot, and the debtor company still needs to do whatever they intend to do before the 21 day limit.
The 21 day time limit to apply to set aside a statutory demand has been interpreted very strictly. If you have been served with a demand and need to set it aside, it is vital that you engage a suitably qualified professional
EXPERIENCED & DEDICATED TEAM – PROVEN RESULTS
CONTACT US – TIME IS OF THE ESSENCE
OR CALL: 1300 545 133 FOR A PHONE CONSULTATION
